Income Protection – Frequently Asked Questions
Who is eligible for Income Protection?
You must be in full-time paid work as a self-employed person, or as an employee or company director to qualify for Income Protection and to receive benefits in the event of a claim.
What income counts?
Income must be earned income so you cannot include rental income or dividends for example. It is important to get this information right during your application for Income protection, as you might be paying for more protection than you are entitled to at claims stage.
How much income is protected?
The maximum that you can cover yourself for is 75% of your income less any social welfare entitlements (currently €9,776 per annum). Note that State Illness Benefit is not paid to self-employed people, including owner directors. There are also some income limits amongst different market providers, but only if your income is above €125,000 does this come into play.
Guaranteed versus reviewable premiums?
Our quote system allows two rate options: (1) Guaranteed rates (2) Reviewable rates. The Guaranteed rates option will ensure that your premium will not change during the term of the plan (unless inflation protection is chosen). Reviewable rate policies will start at cheaper, but will be reviewed on the fifth anniversary and every five years thereafter, meaning increases may or may not occur.
How much income can I protect?
The maximum that you can cover yourself for is 75% of your income less any social welfare entitlements (currently €9,776 per annum). Note that State Illness Benefit is not paid to self-employed people. There are some limits which vary slightly across life companies; but Friends First (our Income protection provider) cover 75% of the first €125,000 of salary plus 33% of the balance of your income, less social welfare entitlement. This is subject to an overall maximum of €175,000.
What are the relevant deferred periods?
The deferred periods are 4, 8, 13, 26 and 52 weeks. The deferred period is the time between when you are injured or fall ill and when the policy will commence payment. The longer the deferred period, the lower the premium. Think about how long your savings, or if applicable your employer provider sick pay would cover for expenses when deciding on the deferred period to choose.
How does the tax relief work?
Yes – The premiums you pay on your income protection policies attract tax relief at your marginal rate. Let’s say you earn €60,000 per annum and your marginal tax rate is 40%. Your quote comes out at €100 per month (gross) but the policy actually only costs you €60 per month (net).
Where does occupation come into it?
When getting an income protection quote, your occupation is very important as some occupations will not be covered due to the nature of their work. Below is a table that will give you a good idea of what class your occupation falls into but it is not the definitive guide as there are some small differences between the various life companies.
White- collar occupations: no appreciable accident or health risk. These occupations will usually be office based. Examples include: Accountants, GP’s, IT Consultant, Solicitors, Administrators etc.
Mainly white – collar and predominantly administrative. Driving may be involved. Examples include: Quantity Surveyor, Dentist, Sales Rep etc.
Skilled occupations, which may involve light manual duties but heavy lifting is rare. Examples include Interior Decorators, Foremen, Electrical Engineers and domestic Electricians, Nurses etc.
Skilled tradespersons, working on construction sites using light power tools. Examples include Carpenters and Plumbers.
How many times can you make a claim?
You can submit claims on your Income protection policy as many times as you require benefits, right up to the end of the policy term.
What happens if my salary increases?
Some companies, such as Friends First and Royal London, have an automatic benefit on their policies which allows you to increase the cover on your policy by a certain amount (20% of the original cover every three years) without having to provide evidence of health. This is optional. The premium will be revised accordingly at the time. This option may be exercised up to five times. If the increase is declined more than once when offered, it will not be offered again.
You can also select Inflation Protection when running your quote. This means that your benefit will increase by 3% each year and your premiums by 3.5% in conjunction. This can help ensure that your benefit automatically stays in line with any salary increases and with inflation and that if a claim occurs your benefit pay-out will also increase by 3% per annum.
How do I ensure best value for money?
We compare all leading income protection insurance providers in Ireland, to ensure the best cover, while we also offer both guaranteed and reviewable premiums options, together with a One Quote discount on the cheapest market price.